If at its current production level, a perfectly competitive firm's marginal revenue and long- run marginal cost are equal to $0.50 and its long- run average cost is $0.35, which of the following statements is true?

Question

Quizplus · Accepted Answer

Since the long-run marginal cost is equal to the long-run average cost, the firm is currently producing at its efficient scale. However, if the market price remains at $0.50, the firm will only break even in the long run. Therefore, the firm should expect the market price of its product to fall, as other firms may also enter the industry, increasing the supply and driving down the price.

If at Its Current Production Level, a Perfectly Competitive Firm's